Simply identifying a defendant’s assets is no longer enough for an effective enforcement strategy

Hitherto, an enforcement appraisal has looked almost exclusively at identifying assets, with little consideration for the threats arising during the litigation. In practice, identifying assets is only the first step in a successful recovery plan. This is particularly relevant when litigation funding is in play. Defendants in fraud claims will often take early, aggressive steps to move control of their assets from institutions identified in the initial investigation to new ones, creating further barriers to successful enforcement. Offshore jurisdictions are regularly deployed to attempt to avoid scrutiny.

The role of the investigator in asset recovery litigation has evolved from being simply a ‘gumshoe’, tasked with identifying where a defendant’s assets are held, to that of playing a major role in the development and implementation of an enforcement strategy. This has become critical, particularly in multi-jurisdictional disputes, where a practical enforcement strategy needs to be developed early in the proceedings.

What can the claimant do to counter these threats? One highly effective tool is a coherent communication plan, fully integrated into the legal strategy. This can provide a significant barrier to defendants seeking to dissipate assets, enabling financial service providers to be directly informed of restraints and informing their decision on whether to take a client on.

A key component of any communication strategy is recognition that opponents often fight back beyond the courtroom. Cases lasting years will make eventual enforcement more difficult if they are ‘waited out quietly’ while opponents fill the information vacuum. Deploying a calm fact-based comms strategy against their efforts to drag down a reputation undermines attacks and raises awareness of legitimate concerns against your opponent. In the age of Google, narratives stick, so proactively setting out your side’s story early will set the tone of overall coverage.

Some jurisdictions are increasingly wary of developing reputations as ‘havens’ for those looking to shift assets out of sight. Targeting these territories with an awareness strategy, using individual cases to highlight broader issues of opaque jurisdictions, will apply pressure on the authorities to take action. Locations such as Singapore and Monaco are sensitive to maintaining their close economic relationships with the world’s economic powerhouses. Being tagged as a hiding place for assets runs counter to their long-term economic interests and ramps up pressure to ensure enforcement is executed.

Third-party advocacy can become a powerful tool in shining that spotlight. Proactive communications directly from the client is important but should not be viewed as the only outlet for key messages. Third-party public figures with authority and expertise offer credibility to an argument and can use their platforms to argue the broader issues surrounding enforcement without an obvious connection to any individual case.

It is no longer enough simply to identify where defendants’ assets are located when proceedings begin; litigators and their investigators must proactively ensure those assets are preserved during proceedings before turning to a recovery strategy – and the key to this is to ensure that those holding the assets know the risks if they deliberately or blindly co-operate in a defendant’s attempts to put them beyond the court’s reach.

Funders are increasingly looking at the enforcement of judgments and awards as investment opportunities, especially with fraud claims. So what has changed? Clearly, neither the nature of fraud claims nor the legal procedures around them have changed significantly. Considerable risks to such investments still exist, and that is where reliable investigators and comms advisers, in a comprehensive task force coordinated by a dynamic legal team, are crucial.

To prove effective, this team must be intelligence-led and properly resourced. Intelligence-led means that the legal team has obtained as thorough an asset analysis of the defendant(s) as discretion permits, derived from reliable information. The asset analysis then forms the basis of the enforcement plan, which identifies the best way to recover each asset from which flows a priority target list. This process is necessarily cyclical and continues throughout the life of the case.

Properly resourced then means two things. Firstly, identifying the capability that is needed to deliver the strategy. Generally, a task force will consist of the legal team (including counsel), foreign counsel, investigators, communications consultants and accountants. Secondly, the make-up of the task force then shapes the budget required to deliver success.

Funders are all too aware that budgets are estimates and are not be relied upon as a final cost for delivering the strategy, however a comprehensive, properly resourced enforcement plan will be less likely to require significant adjustments. The third element of having a firm focus on achieving financial recoveries, which is simply the essence of enforcing a judgment or award, is where building an integrated team is vital.

Taking this approach can make the nature of the investment opportunity clear to a funder. Of course, risks remain, but this approach helps identify and understand them. Some risks may remain that, no matter how comprehensive the strategy and sound the underlying judgment, are simply too difficult for a funder to overcome. However, adopting this approach, with a ‘covers all bases’ taskforce will minimise the risks and boost the chances of obtaining litigation funding.

This article was co-authored by J-P Pitt, Director of Litigation Funding at Harbour Litigation and Nick Connon, Director and CEO of Quintel Intelligence.